Futures on fire after Intel's report.....time to buy nat gas?

Intel soundly beat expectations and futures are on fire again tonight. Browsing the boards it seems to me like there's some interest out there to fade the morning strength which makes me not want to do so. I might try for a quick intraday trade because the attempt at a fade could cause the market to drop for a moment only to reverse course later on....but if I have any doubts whatsoever I'll just stand aside and watch the action.

Natural gas has caught my eye lately. During the summer I noticed fruitless attempts by investors trying to catch the bottom of that sector and a lot of people got hurt doing so. Gas made what looks to be a blow-off bottom in early September and after a nice snap back rally has traded sideways for about a month. This action looks bullish and I believe there's a good chance the tide has turned at least on a cyclical basis.

The bearish argument against gas is the new drilling technology which has allowed for drillers to economically tap into the apparent enormous supply of gas in Shale rocks. Although I'm no expert I'm sure there is legitimacy to this argument just like there was legitimacy to the argument that emerging market economies would have a long term growing demand for oil 2 years ago, but that didn't stop oil from dropping 80%. Whenever there is a compelling long term fundamental argument or story, it often leads to speculative bubbles or irrational pessimism. I believe we have seen the latter because according to my DD, a gas price ranging from $4.50-$7.50is needed for these shale rock wells to break even (each well will have its own economics). With the price now at $4.60 just about all of these shale wells are uneconomic.

Another compelling argument in favor of gas is the steep contango in the futures market which was very similar to that seen with oil late last year. Contango means that futures prices are higher than present day spot prices signaling that the market expects spot prices to be higher in the future. This isn't a guarantee of higher prices, but it's certainly a nice feather in the bullish cap.

A third compelling argument is the ratio of oil vs. natural gas. Historically oil trades 6 times more than natural gas. Currently the ratio is 16 and got as high of about 25 in early September! This ratio suggests oil is "overvalued" vs gas and energy needs will be switched to the use of gas vs oil (I know there's arguments against this notion) I should mention that I don't give such historical ratios when they become extreme any importance until they show a clear sign of a turnaround because as natural gas bulls learned the hard way, extremes can get to even greater extremes before reverting to the mean.

A fourth bullish argument for gas prices are rig counts. They have bottomed at historically low levels and have turned up over the past couple of months. This is usually a good sign of improving prospects in the sector.

Finally, and most importantly, price action is looking good for gas here. After the panic low and snapback, the sideways action is a good sign that the next move will be higher. If this was just a dead cat bounce it's likely that the price would have rolled over by now.

As a hedge clause, let me state that I'm by no means a natural gas "expert" (what the fuck am I an expert in?) and the DD I've conducted is fairly recent which means, I'm sure there's a lot more for me to uncover and learn about gas.

I'm looking at T.GAS which is a natural gas commodity play on the Toronto Stock Exchange (TSX) very similar to UNG in the US. I haven't decided whether to play the ETF itself or by calls on it.